Palantir Technologies Inc (NASDAQ:PLTR) can thank Elon Musk for its 275% year-to-date gain, according to Jim Cramer.

What To Know: Palantir, which rallied nearly 50% over just the past month, maybe the only stock outshining Nvidia Corp (NASDAQ:NVDA) this year, Cramer said Tuesday on CNBC's "Squawk On The Street."

While both companies have recorded significant gains in 2024 driven by their positioning in the AI space, Cramer credits Musk for driving the recent momentum in Palantir shares.

"Palantir is up a lot because I believe Musk is going to turn to them and say, 'The Defense Department, it's yours ... get rid of all those people,'" Cramer said.

President-elect Donald Trump recently announced plans to nominate Musk and Vivek Ramaswamy to a new Department of Government Efficiency (DOGE) in an effort to curtail government spending.

Cramer suggested that DOGE could turn to Palantir for help cutting defense budget spending. He noted that most people don't realize that some government departments could be cut back substantially.

The Tesla CEO could look to Palantir to modernize the Defense Department and reduce reliance on outdated methods of warfare. Palantir is adamant about creating systems that don't put people in harm's way, but the Defense Department is stuck in its ways, Cramer said.

Why It Matters: Cramer's take underscores how influential Musk is expected to be under the incoming Trump administration.

It's worth noting that DOGE wouldn't actually be able to cut federal spending since it isn't a real government department, and would need to be created with congressional approval. And Congress authorizes all federal spending, including to the Defense Department.

"They like big things. Big expensive programs. Alex [Karp] is not like that," Cramer said, referring to Palantir's CEO. "Palantir has the next generation of how we're going to do cyber warfare and the idea of just hardware, hardware, hardware that is constantly over budget is the kind of thing that I think Musk is really after."

Palantir shares ripped higher at the beginning of November after the company reported strong quarterly results driven by "unrelenting" AI demand. Revenue jumped 30% year-over-year and customer count climbed 39% on continued strength in the U.S.

"The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand for the most advanced artificial intelligence technologies from our U.S. government and commercial customers," Karp said earlier this month.

Price Action: Palantir shares were up 0.31% at $64.85 at the time of publication, according to Benzinga Pro.

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